Weekly global protein digest: China poultry report, inflation hitting restaurant value menus

Market analyst Jim Wyckoff shares highlights from this week's activities in the global protein market.
calendar icon 4 February 2022
clock icon 9 minute read

Weekly global protein digest—2-3-22

Latest weekly USDA pork, beef export sales data

Pork: Net sales of 30,400 MT for 2022, primarily for Mexico (20,700 MT, including decreases of 300 MT), Japan (6,000 MT, including decreases of 700 MT), Canada (1,500 MT, including decreases of 400 MT), Colombia (900 MT, including decreases of 100 MT), and Honduras (400 MT, including 100 MT switched from Guatemala), were offset by reductions for China (500 MT). Exports of 32,400 MT were primarily to Mexico (16,000 MT), Japan (6,300 MT), China (3,100 MT), South Korea (2,600 MT), and Canada (1,800 MT).

Beef: Net sales of 20,100 MT for 2022, primarily for Japan (11,800 MT, including decreases of 600 MT), South Korea (3,500 MT, including decreases of 800 MT), Taiwan (1,600 MT, including decreases of 100 MT), China (900 MT, including decreases of 200 MT), and Mexico (800 MT), were offset by reductions for Italy (100 MT) and Bahamas (100 MT). Exports of 16,900 MT were primarily to South Korea (5,900 MT), Japan (4,700 MT), China (1,900 MT), Taiwan (1,200 MT), and Mexico (1,100 MT).

FAO world food price index rises to third highest level ever in January

Global food prices measured by the United Nation’s Food and Agriculture Organization (FAO) increased 1.5 points (1.1%) in January, led by gains in vegoils (to a record high) and dairy. The FAO food price index at 135.7 was the highest since April 2011 and only 1.9 points (1.4%) below the all-time high of 137.6 in February 2011. Compared to year-ago, prices are up 12.5% for cereal grains, 33.9% for vegoils, 18.8% for dairy, 17.3% for meat and 19.7% for dairy.

OMB reviews USDA Child Nutrition Program

The Office of Management and Budget (OMB) has completed its review of USDA’s final rule for temporary standards on milk, whole grains and sodium in Child Nutrition Programs (CNP). The standards will cover the National School Lunch Program and School Breakfast Program as well as the Child and Adult Care Food Program (CACFP) and the Special Milk Program (SMP) for operators returning to operations after the Covid-19 pandemic. The final rule will implement a meal pattern standard for School Years (SY) 2022-2023 and 2023-2024. U.S. dairy interests have followed the development of the rule closely, with representatives of several organizations meeting with OMB on the matter in December.

USDA plans to gather consumer input on ‘Product of USA’ label

USDA has released a notice covering the process they will use to gather input from consumers on the voluntary “Product of USA” label for pork and beef, seeking comments on the process to be used. USDA said this will be used to develop proposed changes to the effort, but this initial step still leaves some very important issues to be tackled.

Inflation is coming to a longtime refuge of price-conscious consumers: restaurant value menus

Burger King, Denny’s and Domino’s Pizza are among the chains that are reducing their menu of discounted items or shrinking portions to try to improve their profits, executives said. Some chain executives hope the trimming of discount menus and meal deals might bring less pushback from consumers than straight price increases. Prices for food away from home rose 6% in the year ended December, the biggest increase in nearly four decades, federal figures show. Many chains increased prices multiple times last year as they tried to compensate for rising costs for labor, food and materials, and have said that more increases could come in 2022 if the inflation persists, the Wall Street Journal reports.

USDA issues semi-annual report on China poultry

Report Highlights:

In 2022, imports of chicken meat (excluding paw) are projected to reach 800,000 metric tons (MT) an increase of 2 percent over 2021. Chicken meat production is expected to decline by 3 percent in 2022 on lower yellow feather broiler production. Additionally, white feather broiler production is forecast to be unchanged from 2021. Imports of other poultry related products, such as chicken paw and turkey products are expected to be flat in 2022.

EXECUTIVE SUMMARY

FAS China estimates for 2022 chicken meat align exactly with USDA Official estimates for production, supply, and distribution and only minor adjustments based on trade data are made for 2021.

Production:

In 2022, chicken meat production is forecast lower at 14.3 million MT (MMT), a 3 percent decrease from 2021. Chicken production only includes white feather broiler, yellow feather broiler, spent hens and hybrids. China’s government estimates for poultry production include fowl other than chicken.

White broiler production is forecast to remain unchanged in 2022. However, chicken production will be impacted by declines in yellow broiler production and producers leaving the market due to prolonged low chicken prices. The government has signaled that it expects poultry production, including fowl other than chicken, to decline to pre-2020 levels.

Consumption:

In 2022, chicken consumption is lowered to 14.6 MMT. Domestic consumption is forecast lower due to declines in consumption of yellow broiler products, a less optimistic economic outlook, and adverse effects on the hotel, restaurant, and institutional (HRI) sector stemming from government measures introduced to control COVID-19 outbreaks.

Imports:

In 2022, imports of chicken meat (excluding paw) are projected to reach 800,000 MT, an increase over 2021. Chicken paws are not included in the PSD estimates for imports of chicken. Domestic production is forecast to decline slightly making imports more attractive.

Exports:

China’s 2022 chicken meat exports are forecast to reach 460,000 MT, effectively flat compared to 2021, as Hong Kong and Japan continue to adapt to COVID-19 disruptions. Exports to other markets such as the Netherlands and ASEAN member countries as expected to remain stable.

US beef exports to EU lagged in 2021

US beef exports into the EU’s High Quality Beef (HQB) quota had a hard time in 2021 as they suffered from the repeated closures of the EU hospitality sector from COVID-19. EU imports of U.S. beef decreased substantially after the end-of-year 2020 holiday season and only gradually increased throughout 2021 again. As a result, they ended below 2020 imports, which had still benefited from the first quarter before the COVID-19 impact. As the U.S. specific HQB quota increased as planned in the new year, the quota usage ratio sank to fifty percent.

US beef exports to the European Union (EU) into the High Quality Beef (HQB) quota in 2021 started from a low level due to the continuation of pressure from COVID-19 in 2020. However, throughout 2021, the EU imports of US HQB steadily climbed each quarter from 2.3 thousand metric tons (TMT) in Q1 to 3.5 TMT in Q4. The quarterly quota fill numbers in the table below reflect the evolution of COVID-19 in the EU and its impact on the hotel, restaurant, and institutional (HRI) catering sectors, which is the main outlet for US beef. While the HRI sector was able to reopen for much of the second half of 2020, the succession of the different waves of COVID-19 have kept much of the sector under locks until late in the summer of 2021. As repeated closures have also threatened the economic survival of many HRI businesses, lots of them have enlarged their business model to take-away and delivery. This kept the demand for US beef from falling back even further. While much of the HRI sector remains open under restrictions, the arrival of the delta variant, followed by the omicron variant, are again discouraging consumers from eating out, leading to a decrease in demand for US beef.

US NCBA votes to oppose cash trade mandate

While Sens. Deb Fischer (R-Neb.) and Chuck Grassley (R-Iowa) continue to push their livestock market reform bill via the Senate Ag panel, a National Cattlemen’s Beef Assn. (NCBA) committee voted Wednesday to oppose cash trade mandates, a major feature of the bill sponsored by the two senators. The American Farm Bureau Federation previously opposed those requirements, upping the odds the senators will fail in their legislative attempt.

Grassley, National Cattlemen’s Beef Association dissatisfied with the JBS price-fixing decision

In a statement, JBS said it did not admit liability but that settling was in its best interest. It also said it will defend against beef price-fixing claims by other plaintiffs, Reuters reported. “If there were any doubt about the shenanigans Big Packers play to line their pockets at the expense of consumers and independent producers, look no further than JBS’ $52.5 million settlement in price-fixing litigation,” Grassley said in a statement. “The other members of the Big Four packers continue to face similar allegations. Although the settlement is a spit in the ocean compared to JBS’ record profit throughout the pandemic, it validates what cattle producers have been telling me when they try to get a fair price in the marketplace. It’s time to put an end to these price fixing schemes once and for all. Congress must pass the Cattle Price Discovery and Transparency Act to bring access and accountability to the meatpacking industry. Those who oppose efforts to improve market access for independent producers — especially national organizations who claim to back America’s farmers and ranchers – need to take a serious look at Big Packers’ anticompetitive tactics, and ask themselves whose interests they are really serving,” Grassley said.

NCBA said it finds the settlement “deeply disturbing.” NCBA said that in August 2019, following a fire at the Tyson plant in Holcomb, Kan., it was the first national organization to request a government investigation of beef markets in 2019. “Now there are settlements occurring without Department of Justice (DOJ) having released findings or even providing cattle producers with an update on progress,” NCBA said. “America’s cattle producers expect and deserve full transparency on any, and all, information related to the ongoing market investigations. NCBA encourages the government to finalize its investigation so we can fully understand any damage that may have been caused,” said NCBA CEO Colin Woodall. “It is clear from this settlement that cattle producers still don’t have all the information they have demanded and is deserved. The DOJ has an obligation to finish their investigation. Cattle producers do not have years to wait for the government to determine whether there has been wrongdoing. We demand answers now.”

Global food prices resume climb to near-10-year highs

The U.N. Food and Agricultural Organization (FAO) Food Price Index moved up to 135.7 in January, near 10-year highs and an increase from an upwardly revised December tally of 134.1. The rise in the index came on a 4.2% increase in the vegoil price index to a record mark on reduced export availability and supply constraints. Boubaker Ben-Belhassen, with the FAO Markets and Trade Division, also cautioned there was a “concern the impacts of these constraints will not ease quickly.” Also feeding the rise in prices was an increase of 2.4% in the dairy price index, a fifth straight monthly increase. Cereal prices, by contrast, were up just 0.1%.

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